Good day, ladies and gentlemen, and welcome to your Perma-Fix third quarter 2020 business update call. All lines have been placed on a listen-only mode, and the floor will be open for your questions and comments following the presentation. If you should require assistance throughout the conference, please press star zero to reach a live operator. At this time, it is my pleasure to turn the floor over to your host, David Waldman, Investor Relations. Sir, the floor is yours.
Thank you, Taryn. Good morning, everyone, and welcome to Perma-Fix Environmental Services' third quarter 2020 conference call. On the call with us this morning are Mark Duff, President and CEO, Dr. Louis Centofanti, Executive Vice President of Strategic Initiatives, and Ben Naccarato, Chief Financial Officer. The company issued a press release this morning containing third quarter 2020 financial results, which is also posted on the company's website. If you have any questions after the call or would like any additional information about the company, please contact Crescendo Communications at 212-671-1020. I'd also like to remind everyone that certain statements contained within this conference call may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and include certain non-GAAP financial measures.
All statements on this conference call, other than a statement of historical fact, are forward-looking statements that are subject to known and unknown risks, uncertainties and other factors which could cause actual results and performance of the company to differ materially from such statements. These risks and uncertainties are detailed in the company's filings with the U.S. Securities and Exchange Commission, as well as this morning's press release. The company makes no commitment to disclose any revisions to forward-looking statements or any facts, events, or circumstances after the date hereof that bear upon forward-looking statements. In addition, today's discussion will include references to non-GAAP measures. Perma-Fix believes that such information provides an additional measurement and consistent historical comparison of its performance. A reconciliation of the non-GAAP measures to the most directly comparable GAAP measures is available in today's news release on our website.
I'd now like to turn the call over to Mark Duff. Please go ahead, Mark.
All right. Thanks, David, good morning. We achieved profitability in the third quarter of 2020, which reflects the dedication of our employees and managers to stay focused on implementation of our COVID-19 safety plan, as well as continuing to meet the needs of our clients while they were largely working from home. As a result, revenue increased 34% over Q3 of 2019, we achieved adjusted EBITDA of approximately $2 million and net income of approximately $1.4 million. This was accomplished despite significant reductions in waste receipts associated with generator shutdowns over the past six months. As we enter Q4, we're continuing to realize sustainable revenue in our services segment, with waste receipts increasing, particularly in the month of December.
The recent surges in COVID-19 are presenting additional headwinds and requiring us to become more cautious in 2021 due to the slowdown of waste generation activities and in procurement announcements throughout the industry. Our sales pipeline for the services segment remains robust, with significant bidding action and proposal activities ongoing over the past several months and over $80 million in annual bid values awaiting for award decisions. Backlog for both services and treatment are beginning to create some uncertainty for 2021 with the latest wave of COVID-19, as government and commercial clients have not restarted full operations, which has had a direct impact on procurement actions and associated awards. While there are several larger bids we're pursuing to support sustainable revenues, until these awards are announced, Perma-Fix will remain conservative in spending and investments to ensure stability until the pandemic begins to subside.
I'll now take a moment to address a few financial highlights from the third quarter relative to the same quarter in 2019. Later, Ben will discuss the financial results in more detail. Overall, our revenue increased 34% to $30 million. Services segment revenue increased 86% to $23 million. Treatment segment revenue was $7 million compared to $10 million for the same period last year due to the COVID-19 impacts, which I'll discuss further in a moment. We generated adjusted EBITDA of approximately $2 million compared to $2.4 million for the same period last year. Lastly, we achieved net income attributable to common shareholders of $1.4 million or $0.12 per share for the third quarter of 2020, compared to $1.8 million or $0.15 a share for the same period last year. As I mentioned, we're moving forward with caution based on COVID-19 resurgence.
However, we remain energetic and enthusiastic about our growth strategy for 2021, which includes continued expansion of our plants and broadening our base of clients for nuclear services. I'm very pleased to say that Perma-Fix has succeeded in not only sustaining our business, but identifying new initiatives and opportunities to further expand and increase our market share in the coming quarters. We've added new resources to our marketing and sales organization and have established a comprehensive infrastructure for better customer management and servicing. In parallel, we've progressed in developing a broader offering to the commercial sector through ongoing permit modifications and new treatment approaches to increase value, such as the deployment and expansion of our Perma-Sort technology throughout Q3, beginning with our foundation project with the U.S. Navy in San Diego.
This was all accomplished while our internal COVID-19 safety committee drove the implementation of rigid requirements into our operation and business functions to ensure the health and safety of our staff, which has remained our highest priority. We continue to remain optimistic about our ability to get through the pandemic and complete 2020 with a real increase in revenue, we're beginning to see impacts from the increases in COVID cases in our primary states of operations, including Florida, Tennessee, Washington, and California. All of which have resulted in a slower generation in subsequent receipts from our clients. That's waste generation. We're getting less waste due to the sluggishness of getting back in action by our clients.
This is particularly applicable to waste treatment operations, which have been able to maintain efficient operations from backlog receipts, but have seen a nearly 50% drop in new waste inventory so far in 2020. While the government-operated facilities have mobilized back to their facilities, full-scale operations have been limited to date, which are critical towards waste generation activities. Our nuclear services segment has continued to remain strong through 2020 with enhanced operations and hiring through Q3, which is anticipated to be sustained through most of Q1. Project performance has exceeded expectations as each project has seen growth, strong client ratings and satisfaction, and generation of earned value as projects have been completed safely and within the cost and schedule commitments. We will also continue to position Perma-Fix for upcoming procurements anticipated to be published over the next few months.
While I've spoken more today about caution and headwinds than I have in the past few quarters, Perma-Fix remains optimistic in our future growth plans over the next four to six quarters. This optimism is supported by our primary client, the Department of Energy, and the direction we are beginning to see regarding waste management objectives and policy. A few of these highlights are as follows. First, recent statements by Department of Energy officials have suggested carryover funds for the government 2020 year that could exceed $3 billion into 2021 if an appropriations bill is passed eventually, which would likely be this winter. This increase would be irrespective of any stimulus budget provisions and would represent nearly 40% increase over the congressional budgets proposed.
Second, several large DOE procurements have been recently published that include requirements for comprehensive waste management solutions, as well as, quote, "end-state contracting models," which support innovations and technology applications for success. Lastly, continued progress at Hanford regarding contract decisions and opportunities to leverage our advanced capabilities in our Northwest facility to solve large-scale problems at the Hanford sites continue to develop and mature. As we've stated in the last few quarters, Perma-Fix has built a very strong team of waste management and health physics professionals and staff that are dedicated to growth and innovation for our clients.
This foundation has provided the continued generation of opportunities in our industry and provide unique solutions to our clients as we pull out of this unprecedented time with the pandemic. Completing another great quarter while increasing revenue over 2019 and teeing up Q4 with positive momentum underscores the strength of our company and ability to adjust our vision to meet the market needs and changes. On that note, I'll turn the call over to Ben now, who will discuss the financial details and results. Ben?
Thank you, Mark. Yep. Thank you, Mark. Our total revenue from continuing operations for the third quarter was $30.2 million compared to prior year of $22.5 million. That's an increase of 33.9%. This $7.7 million increase was the result of a $10 million increase in our projects revenue by the service segment, or 85.5%. Our continued revenue growth from our projects on the West Coast was the primary driver of this increase. Offsetting this increase was lower revenue from our treatment segment, when compared to prior year as the COVID pandemic continues to impact waste receipts in the quarter with customer sites slow to resume shipments of waste. For nine months ended September 30th, our revenue was $77.1 million, compared to $51.4 million in prior year. That's an increase of $25.7 million or 50% growth over prior year.
Our cost of sales in the quarter was $25.4 million compared to $17.4 million in the prior year, or an increase of $8 million. Increased revenue from our service segment was the main driver of this increase, accounting for $8.4 million of the increase in direct costs as costs such as labor, subcontractors, and travel were up while fixed costs increased an additional $405,000. These increases were offset partially by a drop in our cost of sales in the treatment segment as lower revenue resulted in a reduction of $1.2 million in costs, mostly variable, made up of transportation and disposal. While our fixed facility costs increased $436,000 related to maintenance, regulatory, and other depreciation type expenses.
Our gross profit for the quarter was $4.8 million or 15.7% of revenue compared to the prior year third quarter gross profit, which was $5.2 million or 22.9% of revenue. Gross profit in our service segment increased approximately $1.8 million, but was offset by a drop in the treatment segment of $2.2 million. The margin decrease was primarily impacted by the drop in treatment revenue, though we did see improved waste mix, which partially offset this impact. Increased revenue in the service segment, as well as marginal improvement in the profitability of the projects, positively offset the drop on the treatment side. For nine months ended September 30th, our gross profit is at $12.7 million, or 16.5%, compared to $10.9 million, or 21.3%, in the prior year. Our G&A costs for the quarter were $3.3 million compared to $2.9 million in the prior year.
We saw higher wages, incentives, and bid and proposal consulting type expenses, and they were slightly offset by lower travel and bad debt. For nine months ended September 30th, our current SG&A expenses were $8.9 million, or 11.6% of revenue, compared to $8.5 million in the prior year, which was 16.6% of revenue. Our income from continuing operations net of taxes for the quarter was $1.5 million, compared to $1.9 million in the prior year. Year to date, our income from continuing operations net of taxes is $3 million compared to prior year when it was $1.7 million. We had net income attributable to common shareholders of $1.4 million, compared to last year's income of $1.8. That's for the quarter. Year to date, net income attributable to common shareholders is $2.9 million compared to income of $1.4 million in the prior year.
Our basic net income per share for the quarter is $0.12, which was down from prior year's $0.15 per share. Our basic net income per share year-to-date is at $0.24 compared to $0.12 in the prior year. Our adjusted EBITDA from continuing operations, as we defined it in this morning's press release, is $2 million compared to $2.4 million in the prior year. While year-to-date, our adjusted EBITDA is $4.7 million compared to $3.5 million year-to-date in the prior year. Turning to our balance sheet as it compares to 12/31/2019. Our cash balance at the end of the third quarter was $4.8 million, which was up from the $390,000 at year-end. This is due to the PPP loan that we received in April.
Our accounts receivable and unbilled receivables cumulatively were up approximately $6.6 million, reflecting increased unbilled revenue in the Service segment at the end of the quarter. Much of this is usually billed immediately at the new quarter. Our current liabilities were up $4.9 million, reflecting increased accounts payable and expenses related to the increase in Service segment business. The increase in our long-term liabilities of $5 million is primarily due to the PPP loan we received in April. Our backlog of waste at the end of the quarter was approximately $7.5 million, which is down from $8.5 million at year-end, and down from $10.6 million at the end of the third quarter in 2019. Our services backlog at September 30th was approximately $38 million.
Our total debt, excluding debt issuance and debt discount costs, at the end of the quarter was approximately $8.8 million, with $1.6 million owed to our primary lender, PNC Bank, $5.3 million due to PNC Bank for the PPP loan received in April, $523,000 owed on our private shareholder loan, and $1.4 million for other capital leases and loans. Finally, I'll summarize our cash flow activity for the first nine months of 2020. Our cash provided by continuing operations was $3.5 million. Our cash used by discontinued operations was $329,000. Cash used for investing in continuing operations was $1.5 million. Cash provided by investing activities on discontinued operations was $118,000.
Cash provided by financing was $2.7 million, and this is broken down as the receipt of the PPP loan of $5.3 million, offset by our monthly payments on our term loan of $320,000, our net payments to the revolver of $321,000, payments to the shareholder loan of $1.5 million, and other lease financing payments of $414,000. With that, I'll now turn the call over to questions.
Thank you. Ladies and gentlemen, the floor is now open for questions. If you do have a question, please press star one on your telephone keypad at this time. If you're using a speakerphone, we ask that while posing your question, you pick up your handset to provide the best sound quality. Again, ladies and gentlemen, if you do have a question or comment, please press star one on your telephone keypad at this time. We'll take our first question from Howard Brous with Wellington Shields. Please go ahead, sir.
Thank you. Gentlemen, I hope this call finds all of you in good health and your families in good health. Most importantly.
Thank you.
You're very welcome.
Thanks, Howard.
You're very welcome. Congratulations from my perspective on a great quarter, considering what's going on out there. A couple of questions about opportunities. You had mentioned, I'm not going to quote you, but Hanford contract decisions. Can you discuss what you mean by that in reference to potential opportunities?
Sure, Howard. The worst situation we could be in is it being unstable in regards to the procurements. In other words, having them in a hiatus, waiting for things to happen, because people they're just not action-oriented. As we start seeing these actions move forward with the award of the Plateau contract, to the Amentum team, they're in transition right now, which means a lot of things shut down, including waste shipments. That's going to be over with here just in several weeks. Hopefully the decision on the tank closure contract in the next few months is also have a dramatic impact on us. Thirdly is TBI, what we refer to as TBI, which we continue to be encouraged on, in regards to DOE's position to move forward with that, and the $10 million that goes along with that project.
Hopefully, we'll remain on track to receive the next phase II tranche of waste, which is 2,000 gallons, to our Northwest facility for processing. Altogether, we're hoping through Q4 that becomes more stable, more definitive, and continues the momentum we've got right now.
Let's, if I may pick apart a couple of items that I'm familiar with. The TBI contract is a hiatus. When do you expect that to be either re-awarded or awarded?
Yeah. Right now from what we understand, DOE is moving forward with it. They're having to address some regulatory hurdles on their side. We're ready to receive the waste and process it, just like we did the three gallons a couple of years ago. It's still moving forward and I know DOE is making progress on the regulatory side, so we're optimistic that they'll be able to start actually pumping it out this summer.
All right. Let me address the question on the EPA contract with the Navajos. Any more information about that?
I'm afraid we don't have any new information, Howard. I anticipated you asking today and checked this morning with some of our guys to see if they'd heard anything, and they said, "Nope, nothing since last quarter." Those are the kinds of things, that's a great example of a contract that's just stuck from what we believe is COVID, and everyone working from home on the government side. There's no news whatsoever.
I'd like to ask a question, though. My understanding that there were multiple bidders and some of those bidders were in fact rejected, as I understand from calls to the EPA. Can you comment about that, please?
Yeah. We have not confirmed that, but we have been told, as well, Howard, that they have shortlisted, and that some people who have participated in the procurement have been informed that they were not selected. We have not had that verified with the EPA. That is what we've been told from other bidders.
My understanding is Jacobs is your prime and you're the sub in that. Is that correct?
Yeah. It says the procurement, Howard, we really can't get into teaming and that kind of thing right now.
Okay. All right.
yeah.
Let me pull apart a couple of other opportunities. The EWOC contract, can you address that opportunity, please?
Yeah. EWOC is really a technology and facility that's in place to support largely the next phase of the Oak Ridge closure mission, to provide a transloading for large volumes of mercury-contaminated waste. That's largely waiting for more activity for mercury remediation in Oak Ridge. It's teed up. As soon as DOE awards a new task order to the incumbent contract, which is the UCOR team, or if they award the closure contract, then the EWOC facility will be front and center and be able to provide value to those missions. As we speak right now, they're not doing any mercury remediation, the large volume contracts that we have our eyes on have not come out. We're doing smaller things there now to sustain some revenue, not the big ones that we were hoping for by now.
We are beginning to generate revenue at EWOC, and are using it for other things today.
Can you address the magnitude of what EWOC could potentially be as opposed to what it is currently? Say on a percentage.
Yeah, right now it's very minimal. We're doing some equipment decon and those types of things there now. It's very limited revenue, a couple million dollars a year at most, would be our target. If we were to use it for transloading large volumes of waste out west, we could see between $5 million and $10 million a year would be a very conservative number, depending on the volume of waste that DOE is moving within the Oak Ridge closure.
One just generic conversation about a change in possible administration. Should the Biden administration, or should Biden win the presidency, do you foresee any change in treatment or services by the DOE?
A Biden win, I think there's a number of things that will happen for us, mostly positive. Overall, the Democratic administrations have been good for funding the DOE environmental management programs. We expect that to continue. We don't see a significant change between administration changes. There's a couple things that we'd lose, that would be at risk, I should say, Howard, if the Trump administration does not win. That would be just the risk of some of the momentum we've got on some of the bigger projects that we've already mentioned. They'll likely continue, as there's a very strong federal staff that will be the common thread between both administrations.
The federal staff in Germantown or in Forrestal, DOE headquarters, as well as at the bigger sites, will likely remain and they'll carry those balls forward. I don't see a dramatic impact either way. I think the biggest potential impact we have is what are they going to do with the $3 billion they have in carryover, and will there be any stimulus like there was with the ARRA initiative back in 2011? Those two questions are big ones. As you probably know, when they had the last stimulus package, almost 10 years ago now, there was a lot of emphasis on waste management and moving waste to clean up the sites. That was really good to us. We're hoping for the same thing. It's hard to speculate what they'd spend it on. Whatever they do, it'll be action-oriented, and they'll generate waste.
That all just generally will be good for us.
Just two more real quick ones. The TBI contract, can we assume that it will be awarded or re-awarded, and when do you think that could be, based on your best guess?
Yeah. The contract vehicle, I'm not really that familiar with the contract vehicle right now. I know that they're moving forward with things. Howard, I would anticipate that to continue to get through the regulatory side of it and begin to move forward with the waste removal from the tank for the 2,000 gallons, as I said, by the summer. I'm not really sure. I really can't comment on the contract itself other than it seems to be moving well. DOE views this initiative as of high value to the overall mission. Obviously, we've been poised and waiting for this for quite some time, and hopefully they'll continue it all the way through the 2,000 gallons and beyond. I can't give you the definitive time on the contract, I'm afraid.
No, fair enough. Thank you for your comments. Best of luck to you guys.
All right. Thanks, Howard.
Thank you.
As a reminder, ladies and gentlemen, if you do have a question, please press star one on your telephone keypad at this time. Again, that's star one on your telephone keypad to enter the queue. We'll take our next question from Steven Fine. Please go ahead, sir.
Good morning, gentlemen. Good quarter. Congratulations. No one said it. I normally say it. You basically did last year in sales. You're saying you got $38 million in service, $7.5 million in treatment. Is that going to be, for example, the $38 million in service, will that be completed in the fourth quarter?
No, Steven, that won't all be completed in the fourth quarter. That will bleed significantly into next year and through Q1 at minimum. The $7 million rolls over pretty quick as far as the waste treatment side of the house goes. We depend on replenishing that along the way. It is an indicator of how much waste receipts we're getting in, which as we mentioned, slowed down from COVID. As we also mentioned, we did have a good September on waste shipments, so we saw some increasing. It is plateauing, and it will likely slow down in November, December. We typically start to see it pick back up after the first of the year, weather permitting. Right, to answer your question, the $38 million will bleed into Q1 pretty well. We plan to break the 100 million mark for revenue in Q4 for the year.
We plan to have a good Q4 as well and take that momentum into next year.
Am I correct? I looked quickly over the numbers. You're paying down debt, right? Like you're paying off loans? While you're doing this.
Correct
in the midst of all this, you're paying down debt, too, which is not enunciated. Am I correct in that perception?
Yes.
Good.
Yeah.
All right.
We're taking care of our term loan.
Yeah.
We had the term loan and the shareholder loan.
Yeah. That's something. I mean, in these times, to be able to say that, and then your sales are up, I mean, that's fabulous. Let me ask you a question. When we talk, I mean, okay, so I understand to get the treatment waste, it's got to be generated. COVID is not a problem in service?
It's not a problem in service, Steven, as much as it is in service procurement. We're in the field now, even though our clients are largely working from home. We have about 150 people of our 380 people in the field. Those operations can continue. Where we're seeing some concern is we've got $80 million in bids outstanding without awards occurring. The procurement side of the house is where we're seeing the impact on services. That could all loosen up very quickly, and we could get a flush of awards or, hopefully, our proportional share of them, and be fine. If this COVID thing continues well into Q1, then we'll see some delays there and some situations we'll have gaps between our projects, which nobody wants. That's where the issue is on the services side.
All right. You just said, it's obvious you're going to do $100 million this year, which in itself is just staggering. Let's assume the worst. You're going to do $100 million next year? In other words, I would normally expect you to do $200 million. I understand all the obstacles out there, but do you think that you can at least be flat, which I think is quite an accomplishment if this thing continues?
That's a great question, Steven. Yes. The answer is yes. We think we'll be a minimum flat. We have been talking for quite some time on these calls that we were really planning on 50% growth every year. We almost had it this year. We had it last year, and we're close to having it this year. We took a beating here with the waste receipts, we are planning to at least be flat next year with some modest growth. We've also submitted a lot of very large bids for big projects, $100 million-plus projects over several years. A couple of those awards will get us higher and get us to that goal. Our minimum is to break or to see growth over this year, which would be over $100 million.
All right. Presuming you're flat next year, and then you don't have the $5 million that you got from the Government, are you going to be all right cash flow?
Yeah, we'll be good cash flow. We're expecting better margins. As Ben was kind of mentioning is services generates less margin than treatment, which is obvious because of our assets in treatment. With getting waste receipts back to normal, getting the EBITDAs up and the margins up on average will put us in a position we'll be fine.
All right. When you say there's $80 million out there, is the issue that the people are not there to go consummate the bid or it's just they can't because no one's out in the field? Is it something else? Stupid question.
It's not the field so much, Steve, as it is the procurement process and the procurement folks.
All right.
You really can't tell in our position. We're not privy to inside information, so we're speculating when we say that. It's a procurement process that's taking longer than it normally would because of COVID.
All right. You say the treatment's down. All right. Presuming everything was okay, how much more would treatment been?
Well, it would've been-
In other words-
It would've been double.
Is there?
It would've been double.
It could've been double?
Yeah. It's speculation, Steven, but yeah. Right now, we were planning on $30 million to $40 million for 2020. We'll come in a little bit higher than half of that. I believe we would've met it. Yeah, we lost a good almost $15 million to $20 million in waste receipts that we would've gotten otherwise.
Still there, Steve?
Yep. You still there?
Steve, we'll take our next question from Howard Landis. Please go ahead, sir.
Yeah. Good quarter, Mark. Two quick questions.
Thank you.
One is I hear you're optimistic about the long term and about 2021, but we might expect the next quarter or two to be sort of flat to down. Is that a fair summary or am I missing something?
No, you hit it right on the head, Howard. We're really not expecting to be, but there's a potential that Q2 could see a dip. Again, if we see this COVID thing start to break up a little bit in early Q1 and start seeing some normalcy and people get back to operations and, like I mentioned before, the procurement cycle, we'll be fine. Won't see any kind of impact, but we need to start seeing some normalcy in three or four months so that Q2 can be backed up. Q1 looks pretty strong, and we got a good momentum coming out of Q4. It's the Q2 part that's got us more cautious.
Gotcha. How is the PPP loan going to play out as you see it at this point?
Well, right now we've got an application in for forgiveness, and it's past the primary lender and with the SBA. What we've been told is, it can be up to 90 days by the SBA, and that clock started on or about the middle of October.
Okay. Presumably everything right now is on the books. You haven't taken any of that, assumed any of that's going to be forgiven.
Correct.
Got you. Okay. Thank you.
Thanks, Howard.
We'll take our next question from Anthony Harpel. Please go ahead, sir.
Hi, guys. Hope you all are well. Congratulations on a good quarter.
Thank you, Anthony.
One question I have is, the Washington State Department of Ecology for years has argued that the Hanford Tri-Party Agreement and the 2016 amended consent decree require or are based on the plan to vitrify all of Hanford's radioactive underground storage tank waste. The State's Department of Ecology on multiple occasions has stated that vitrification is the only acceptable method of treating Hanford's underground low-activity waste. The lead regulator of that Department's nuclear waste program has just left the agency after four and a half years in her seat to pursue a different professional opportunity. Can you please discuss, if you have a point of view, what impact do you expect as a result of her departure on the prospects for treating the supplemental low-activity waste stored in the underground tanks at Hanford through grouting as an additional supplemental method to vitrification?
Well, I'd be hesitant to comment about a regulator, Anthony, on this call. I will say that, I think, the department has made significant strides, in their strategy to demonstrate action, in their cleanup program. They've also made great strides in progressing with their DFLAW facility and construction of the infrastructure and their overall tank program. A lot has changed in the last 12-18 months in regards to the overall program, and the DOE leadership has focused on this whole initiative as well, and are all on the same page. There's fresh momentum, renewable momentum, from what we see. We are at a distance, Anthony. We're not in the weeds with these things, so we watch from a distance.
We see that all being so positive, and with what's happened with the Savannah River initiative, and the negotiations that are ongoing with the state. That's why we see a lot of optimism in moving forward with a supplement to the DFLAW treatment facility, which obviously would include offsite commercial waste treatment of the tank waste. I don't know how much of it is associated with that manager leaving, as much as it is the strategy by DOE and the relationships they have with the regulators overall.
When you spoke about the timing of the TBI phase II being the summer, is that a conservative expectation or is that a more aggressive expectation?
I think that's conservative. I think that, again, it depends a lot on COVID, how much that slows things down, meetings down, and those kinds of things on behalf of the regulators that are working with DOE on their hurdles. Again, assuming that life begins to get back to normal in January, February timeframe, which we all know is not necessarily a conservative assumption, then yes, I think summer is reasonable. If we continue to see more COVID delays through Q1, that may be pushed into the fall.
Okay. Perma-Fix was part of a team led by Jacobs that was selected by the DOE to participate in a 10-year IDIQ services contract nationwide. Can you just give us an update on to what extent the DOE to date has announced any task orders associated with this contract and what your expectations are around winning business associated with it?
Yeah. Anthony, DOE has had several meetings, and have spoken at conferences, in regards to that question. That's a frequently asked question in those meetings because of the expectation, anticipation by all the folks that were selected for that contract. DOE's response was at one point that there was half a dozen projects queued up, and they were anticipating moving forward with that. Since then, they've had other meetings or other conferences where they've said there's only one or two. We really don't know what's queued up in that contract vehicle. It may depend on stimulus. It may depend on how they're going to spend their carryover backlog. We haven't seen anything. We haven't seen a forecast. Anything that we would say in regards to the potential for RFPs would be completely speculation and not supported by anything DOE has said formally.
I think the one thing we do know, Anthony, is that we haven't seen anything, and we haven't seen a forecast. Without a forecast, typically, you get a forecast put together if you're expecting some task orders to come out.
Okay. Mark, thank you very much.
Thank you.
Again, congratulations on a good quarter.
Great. Thank you, Anthony.
We'll take our next question from Bobbo Jetmundsen with Worthscape. Please go ahead.
Hey, guys. Good quarter. Wanted to just ask a quick question about the Perma-Sort system and kind of help me understand how big a market that is and how you sell it and so forth.
Yeah. The Perma-Sort system is a technology that we've really refined a lot in the last year. What it does is you put a quantity of waste, like a yard of waste, into a hopper. It pours it down onto a conveyor belt. We have some proprietary software and detection systems that detect, with a cesium source, the radioactivity in that soil. As it moves up the conveyor belt and gets to the end, the detectors tell the conveyor belt which way to go as far as these gates go. It goes into a clean pile on one side or a contaminated pile on the other side. What that allows you to do is to very rapidly, like 200 tons an hour kind of thing, which is really moving, very rapidly minimize the waste that you have to send to an expensive disposal facility.
It allows you to sort very rapidly so you can somewhat concentrate or at least pull out the contaminated part with very high degrees of quality. We're doing now for some dredging operations in San Diego. We've done it for other projects along the way. This is our fourth or fifth project. This is the first time with this new system. As far as the market goes, there's a tremendous market out there for that. Basically, if you're doing remediation of radiological waste, then this will work very well. We're doing some R&D on expanding that segregation capability into non-rad types of contamination like mercury and other types of constituents which are very important for upcoming missions and upcoming bids, which would allow us to very rapidly sort other contaminations as well.
The market is very broad if we get that software working and those detection systems working. Right now, we have two projects ongoing. The values of those projects is below $10 million. We do see it applying to a lot of other very large projects that are coming up for procurement and providing a very real solution for cost savings that will put Perma-Fix in a position to join larger teams and be a part of real important solutions for some of those procurements. It's really just getting started. It's not all brand new, but the performance we've seen on this current system is advanced and has exceeded expectations for the clients who we're working with.
Great. Is that an RFP type of process, or how do you find the customer in the project?
Yeah, it's mostly RFP process where they'll have a technical solution required, and sometimes it's just a rate required. Because of our ability to segregate the waste, we'll be able to have a cheaper rate of waste disposal costs. Both ways, mostly through the RFP process.
Yeah. Okay, great. Thank you.
Thank you.
For our next question, we'll return to Steven Fine. Please go ahead, sir.
I had earplugs on. I don't know if that's the problem. When I hold the phone, if I dip down, my voice goes down. For my fellow stockholders, I know you guys can't say it, there's a report that came out, I don't know who it was, the GAO or something, it came out about six months ago. Basically it talked about the tank leakage. Basically, it's questioning if it's going to last. In this report, one of the things that was acknowledged that one of the alternatives is the TBI, which they called something else. In addition, when the DOE responded to this, the DOE said, "Yeah, that could be an option." Look, I'm an engineer and I'm very technical.
This is what I did for 40 years. I'm just amazed that simply as a backup system, as that if something happened, that they're not coming to you. I'm not saying they will. I know they could be listening. Because God forbid something happened, you're there. The other issue is that, and this is my personal opinion, is that everything I read says this is going to take decades. Even if you guys were sitting on the side doing this in small amounts, it still saves the government money because all this money that's just been pumped into our economy.
Hanford more money. We have climate ecological issues that's going to crowd out stuff.
I'm not sure if it's a question there, Steve. Yes. We've seen those reports. The IG had reports, the Corps of Engineers had reports as well along the way, along with GAO. They certainly do highlight alternatives to supplement the ongoing strategy. Hopefully we'll start seeing some of that supplementing going on in the next couple of years.
We'll move to our next question from Tristan Barr with MTB Asset Management. Please go ahead.
Hey, guys. Congratulations on, if I'm right, I think this was your best quarter since Q2 of 2012.
Wow.
It's kind of amazing to watch the stock get hit on what is truly a fantastic quarter. I must admit, I think that's directly a result of the tone that was taken in the press release and on this call. Most companies at this point in time are encouraging people to kind of look through the pandemic and to look at what results may be like in a normalized environment, where I think you guys have been a little conservative here and warned people about what things may look like should the pandemic continue. You guys have had a monster start to the year through the teeth of a pandemic, where by your own accounts, you've lost $15 million-$20 million of high margin treatment business. That's $3 million-$5 million in EBITDA. You've made no mention of the fact that that business didn't go away.
It's just delayed. That waste needs to be treated and disposed of, and so it's sitting at customer sites, and when they pick back up, you pick back up. At some point in time, you're going to have a pig in the python. You had a question, you've led people to believe, and you switched it a little bit, that Q4 and Q1 are going to be weak. Q4 is going to be very strong, it sounds like. Q1 will be strong as well, and you're telling people that Q2 could be weak should the pandemic continue, and should the government not get back to business. I just don't understand this kind of excessive conservatism when you've done such a good job turning around the service business.
You can't control the treatment volumes, but they will return at some point in time, and you haven't highlighted the fact that that's going to be pent up demand for your high margin side of the business. Q2 may be weak, but that's a long way off, and as you said, there's a lot of bids out there, and when they're awarded, that could very quickly come back up to the point where you shouldn't have warned people at all. I wish you guys would take a little bit of a victory lap, acknowledge the turn in the service business and the tremendous job that you've done kind of adding legs to the stool and say that, yeah, while Q2 could be weak, you still have a very strong Q4. You still have a very strong Q1. You've been paying down debt.
You're likely to get the PPP loan forgiven. Oh, by the way, we have two absolutely massive company changing prospects out there, which could be the reaward of the TCC. Building on what Steven said, the DOE itself, in response to the audit of the tank waste, said, "We really should take a look at just treating the waste rather than kicking the can down the road." That is a significantly positive impact statement for the TBI, and it just seems like you guys, instead of focusing on the positives, keep pointing out what could go wrong in six to seven months' time.
Yeah. Well, I appreciate your comments, Tristan. I understand where you're coming from. We did have a lot to brag about, and I thought we did. I can't explain the drop in the stock in the last few minutes. What I can say is that we're also not the first company trading publicly right now that has expressed caution for COVID. In fact, I challenge you to find many that haven't expressed caution. We haven't expressed caution up till now because we've been chugging along pretty well and had good, strong backlog. The caution we're expressing is specifically associated with what we see coming that we've had a delayed impact from COVID that causes me particularly to be concerned. However, as I also said in the statement, that we have the management team, the tools and technology, and what it takes to get past it.
Even if it does hit us, it's not going to be a sustained impact. In other words, our market's not going away, and we're not going to lose our competitive edge. We're just taking some concern in regards to delays in procurement announcements and delays in waste receipts. We do think we're going to have a strong close for the year. Our Q4 looks like it's going to get us over the finish line to over $100 million without too much problem at this point. Like I said, it'll go well into Q1, but I appreciate your comments in regards to being conservative. We wanted to be forthright with our investors.
I understand being forthright. It seems, again, a little overly cautious. The $15 million-$20 million in treatment revenue, is that lost?
Not lost. I could say it's probably very limited amount of it is lost. It's delayed.
Again, most companies, when expressing caution with COVID, still kind of guide to what a normalized environment would look like. A normalized environment to you mentioned 50% a year growth. In a normalized environment, you guys are doing 100. Based on what you've delivered, and now not even including what looks to be like a pig in the python whenever waste shipments restart, and not including the potential benefits of the TBI and the TCC, is a company that's doing $120 million plus in revenue and 10% EBITDA margins. At some point in time, and I think correctly pointing out the risks of the model, you also have to point out what the model is. At some point in time, we will get past COVID. You've been paying down debt. You clearly have the cash flow to get to the other side of this.
I think you guys need to point out to people what the other side looks like. Given the fact that, again, you're looking at $120 million plus and $12 million plus in EBITDA, and you have these two kind of massive potential contracts that are imminent. They could be awarded at any point in time. I would argue that that supports a much higher stock price than $6.50. I do think that you guys are correct to point out some of the risks and pitfalls that come with a global pandemic, but you also have to point out how well you've already executed through the pandemic. It hasn't exactly been a non-event for you guys, given the $15 million-$20 million of high margin revenue that's been lost, or sorry, that's been delayed, that should flow through at some point in time.
Not counting that, not counting the two big things, you've got a very attractive base to build off of going forward. I think you actually have to start promoting the good with the bad and say, "This is where we're standing, and we feel and we look pretty good," particularly at this price. You've got a hell of a story to tell.
Well, we agree with you, as you know, Tristan, that we are undervalued at this point, and we do have a lot to boast about in regards to how we've changed. I think we've been doing that. We're hoping to get some of these big opportunities you mentioned awarded and build on them. We haven't had a lot that we expected over the last nine months, hasn't happened. They haven't with anyone due to the pandemic. Hopefully we'll start to see that in the next couple of months and be able to do the press releases and get the risk behind us, and get that growth back that you're talking about.
Well, great. I'm glad to hear that you agree with me on the undervalued nature of the stock. I know that you and some others have been aggressive in buying stock personally. I'd like to see the few board members that you have that certainly have the resources that are under-invested in the stock to take advantage of this dip and show their confidence as well. Appreciate it.
All right. Thank you, Tristan.
For our next question, we'll return again to Steven Fine. Please go ahead, sir.
I don't know if I heard Tristan's made comments, I think that were I agree with the positiveness, but I was also a government contractor, one has to have humility. All right. It's that simple, because you do deal with different personalities and so forth. Also, I've now been a stockholder, I don't know, what I'm going on four years, Two years ago, you guys were optimistic, then it didn't come in. People were yelling about it. Now you're showing, in your defense, I'm defending you now, Mark. Now in your defense, you're showing humility and you're exceeding. Guess what. I'd rather you, even though I totally agree with Tristan is saying, I totally agree this stock is undervalued. I'd rather you have humility and surprise us every time, because it's amazing what you're doing.
I think that, again, to my fellow stockholders, I'll say it a little bit in a calmer way. As I study what's going out there and try to read and understand, even if they build that vitrification plant, it's still not big enough, and they're still going to need you. That's what just boggles my mind because we're in an earthquake zone, and there's dangers out there. There are arguments about climate change, and I just don't get it. This has been an education. A couple other questions. When is the medical going away? I still see it there. Hello?
Yeah. Hey, Steve. Yes, this is Lou. We are still looking at options in terms of where to go with medical. Presently, we see several options in terms of what to do with it, including going away. We're going down various paths in terms of what to do with medical.
Yeah.
One thing we can say, Steve, with medical, and again, this is Mark, is that we have absolutely minimized the cost to the company as much as we possibly can at this point to make sure we don't drain on other operations and initiatives we got ongoing.
Well, my opinion is it should go away because there's just too many folks out there now that have done what you were trying to do. I congratulate, I applaud the effort, but one also has to say when to say no and when to go on. When you were talking, Mark, about that you've enhanced your infrastructure so that you can go after stuff, what does that specifically mean? I'm not in great depth, but what does that mean? Is that new people? It was a bold statement, so what does that mean?
Yeah. It's a very tangible statement, too, Steve, and it means a couple of things. Number one, that we've added some new professionals on the marketing side of the house, pure marketing, as far as branding goes, to expand us into different directions. We've hired a couple additional sales professionals on the waste treatment side that come from the commercial industry to break us more into the utilities and commercial power groups. We're deploying a new CRM system that's more organized and comprehensive to support all the folks that are in business development. There's a big initiative we've got ongoing. We have a new marketing plan in place. It's a more organized and detailed approach to business expansion is what we've got in place. People in our industry will start seeing that application in the next couple of quarters.
I'm presuming there's a strategic plan there. Is there a strategic initiative, let's say down the road, all our dreams, if you will, you got to have a dream to live, but let's say all our dreams don't come true at Hanford. Is there a strategic plan of where you go? Like, in other words, becoming part of somebody else, buying somebody, becoming more of a service company. Is that discussed?
It is, Steve. It's discussed at every board meeting each quarter. We have a list of transformative initiatives that we are pursuing at any given time. TBI is just one of those. There's six or seven others going on at the same time each time for everything from the EWOC facility and deploying new technologies there to capital improvements at different locations to expansion of our international work. There's a number of other ones as well. We move in a lot of different directions all at the same time. Not too many, enough that we can handle and keep maturing from quarter-to-quarter, and we present to the board each quarter on each one of those.
All right. Two, couple more questions. You made a comment that the tank closure is alive. From that, am I to infer that you have had discussions that it's still out there and DOE is still considering it? I do comment they extended the present people that are doing the tank maintenance. The extension was rather odd because when they extended people before, they said, "We're extending it until we award," but they extended them and didn't make that comment. Again, my question is, when you say it's still out there, does that mean are they going to award this thing or what? Because it is radical.
Yeah. It's in the procurement process, Steve. Basically where it is right now is DOE has publicly said that they're continuing to look inwardly at how they made the selection the first time based on the protest claims. They're still in that process. They've been given no indication of which way they're leaning and what they might do. There's an enormous amount of speculation out there about the future, how they might fold it into something else or do something with the overall bid or do a BAFO, whatever they're going to do. I don't think anyone in our industry really has a guess as to what might happen. If they do, I certainly don't know what it is, which I'm not in the know on these things. We really have no idea where DOE is going.
The participants, like Perma-Fix, are very simply waiting for further information.
Andy?
that's really all I can say about that.
Okay, about a year ago, I don't know, maybe I drank too much caffeine, a year ago, there was the discussion about the action of the DOE definitely classifying low and high. That is reality now. There's low and there's high, that's accepted or is that still questioned by the State of Washington?
Yeah. I really can't address that at this point.
Okay.
I don't even know at all.
All right, fine. That's I'm going to ask. All right, my last question is this. Presuming you get, not presuming, I would imagine you're going to get the 2,000 gallons, even though in my mind it's a waste of time since you've proven the science. If you get that, when you get to 2,000 gallons, how long does it take you to process the 2,000 gallons?
Probably about a week at most. Only because we're in an operational mode. A few days actually, but it's not a lot.
Yeah. All right. I wanted to make that point so my fellow stockholders understand that you know what you're doing. All right. Look, I talked a lot. I do believe the stock is undervalued. I think what you guys have done is just absolutely, you just need to be applauded. You've gone out, you diversified yourself, and you survived in this world. I'm just befuddled by this world. You guys are surviving. You had a substantive quarter. You're giving us hope and stay humble. All right. I disagree with Tristan. Yeah. It's one thing promoting the stock, but stay humble because when you stay humble, that means you're going to evaluate the positive and negative. You're going to think about what can happen, and then you're going to plan for it. That's the type of company I want to own. Anyway, congratulations and I applaud all efforts.
Thank you.
Thank you.
We'll take our next question from Chuck Dickinson. Please go ahead, sir.
Hi. Good morning, guys. I just wanted to say for the record that I know we're not doing a poll here, but when I heard Tristan go into his little speech there, it sounded like exactly what I was going to say. I'm in 99% agreement with what he said. On the other hand, the 1%, I do understand, if you're looking at Q2, we're talking what? That starts in April. We're already in November, it's really not that far away. If you start to see a little something with regard to procurement that tells you, well, there might be a little hiccup here, let's get out in front of it. We don't want to surprise shareholders.
We don't want people coming back to us and saying, "Why did you never tell us that there might have been an issue here?" We can actually see on the treatment side that's been happening with delayed shipments for at least a couple or a few quarters already. It's just that the outsized opportunities that provide upside to you, and I don't need to go through them again, really outweigh what is probably a fairly ephemeral issue in terms of possible or potential COVID impact that nobody can gauge that almost every company is going to have to face. I won't weigh in on that any further.
You did say two things that I thought were very interesting that I had not heard before that are incremental, and the first one being about this carryover of a DOE fund amounting to over $3 billion going into 2021. That's a 40% increase, and obviously you would have hopefully some potential exposure to that. That's kind of a big item, and I'm glad you highlighted it. The question I would have there is does that money have to be spent next year? Is it likely to be spent? Is there an option where they just say, "Well, we'll try to redirect that to another department if we have to provide stimulus funds somewhere else"? That's the first question.
The second thing that you brought up that I thought was very interesting was this whole idea of could there potentially be a new stimulus package that comes out much like there was a decade ago, which I wasn't aware of, that could also be a huge factor. Those two things, the $3 billion and the carryover of the DOE fund and at least the potential or an idea, because it happened before and it's been over a decade, and we have to get this economy moving again, and the Democrats are likely, if Biden comes in, they're likely going to consider a lot of options. That may be one of them. Those are two huge items over and above the large contract bid opportunities that you have out there that you have not spoken about before.
Tell me again on this $3 billion fund, does it have to be spent? What's the likelihood that it gets spent? Any other color you could provide on what a stimulus package looks like versus the last historical one?
Yeah, Chuck. I appreciate your opening comments in regards to Tristan's comments. To address your question directly, the $3 billion, that came from some statements that DOE made about a week or so ago, that they had about $3 billion in carryover. It's not a fund. It's not something that's been appropriated by Congress necessarily, specifically to carry into 2021. It's money that was not spent in 2020 due to the shutdown and impacts from COVID overall. As carryover money, they can't spend that until the government signs a budget and enacts a budget, and then they can tap into that in addition to their budget that's approved by Congress. One could look at that and say, okay, last year our budget, or say the congressional budgets were around $7 billion.
The congressional marks, assuming they go with those, which I think is reasonable speculation. This $3 billion would be spent on top of the $7 billion that they get for 2021. That's government fiscal year 2021. It's not a fund, but the result's the same. If they have that as carryover, they're able to spend. I have absolutely no idea what DOE will do with it, whether they'll spread it out or what. I don't know what the rules are. I'm not an expert on these types of things other than having seen the press release and the articles that have been published in regards to the fact that they are planning to have that funding. As far as the second comment, it was more of the stimulus. That was complete speculation as to if they have an infrastructure type of package that they've had before with DOE.
I do not know if that's the case or not. That was speculation that, given where things were in early Obama administration for the ARRA enactment, if they had something similar to that, we would anticipate the department seeing somaething along the way. Remember all the shovel-ready projects that were funded. That, again, that's complete speculation whether the new administration, if there is a new administration, would fund something like that or not. Again, we don't have any information on that. We're not saying there's going to be anything like that, but all I was mentioning was there's a potential for something like that after the election's over.
Well, I think that's worth mentioning, given that you can correct me if I'm wrong on this, but I think under the Trump administration, hasn't Trump, the last couple of years, maybe more than that, sort of looked at Hanford and decided, "Well, let's maybe take this budget down a little bit here?" That hasn't really happened only because it's Congress that authorizes and has the ultimate decision on the purse strings, and they've basically overridden him and in effect said, "We're going to look at this thing, and we think Hanford's pretty important, and no, we're not going to take the budget down there." You don't know how this election turns out. You don't know what a Democratic administration, should Biden move in, is going to do.
We do have historical precedent that at least on a couple of occasions, and maybe more than that, this administration, just at the highest level, the President has argued for less funding going into Hanford. Am I wrong about that?
That's the way I understand it, too, Chuck.
Okay. All right. Great quarter, guys.
Okay. Thank you.
For our next question, we'll return to Tristan Barr with MTB Asset Management. Please go ahead, sir.
I just wanted to kind of clarify something here. By no means do I think that you guys should be all sunshine and only give the positive outlook. I just think it would have been more balanced, given the fact that you have the potential for this kind of rather substantial pickup of unspent money from the current year flow into next year and obviously the prospect of potential stimulus action being a benefit as well, that the kind of caution towards Q2 might have been better expressed on the Q4 call should this delay in procurements still be around at that point in time. Again, I mean, the amount of money that could potentially flow through, correct me if I'm wrong, I mean, that is also likely to be more now skewed towards treatment than services. Is that correct?
It's likely to impact both. It depends on the projects that are available to be funded, Tristan. It's pretty tough to tell how DOE would spend that money in regards to whether they would do service procurements, cleanup projects, or simply move more waste out. It's really hard to tell.
Got you. Thank you.
You'd assume it would be both.
All right. Thank you. That appears to be all the questions that we have at this time.
All right. I'd like to thank everyone for participating in our third quarter conference call. As I mentioned earlier, we were successful in navigating what could have been a more challenging environment due to COVID-19, and we're well positioned heading into the fourth quarter. Based on our current sales pipeline, our accelerating bidding activity and backlog, and the potential for strong carryover from 2020 funding sources, we remain highly encouraged by the outlook for our business in the coming several quarters. Thank you for participating.
Ladies and gentlemen, this does conclude today's teleconference. We thank you again for your participation. You may disconnect your lines at this time, and have a great day.